The government of Hartford County, Connecticut is in line to receive $173 million in local aid under the American Rescue Plan Act (ARPA). There’s only one problem: the government of Hartford County doesn’t exist, nor do any of Connecticut’s other counties have county-level government despite being allocated a collective $691 million under the bill.
The traditional county lines are useful for certain purposes, like electing a few countywide officials, but there is no proper county government to receive, let alone spend, these funds.
Similarly, Rhode Island counties receive $205 million, but Rhode Island doesn’t have counties, at least not as anything more than convenient jurisdictional lines.
Another $15 million worth of local Fiscal Recovery Funds goes to Alaska’s Unorganized Borough, which is—in a word—unorganized. It is a collection of sparsely populated Census districts across the state, has no centralized functions or authority, and is simply the catch-all classification for the roughly 50 percent of Alaska land that is not part of the 19 Organized Boroughs. Actual government administration in the Unorganized Borough is at the city level.
Eight of Massachusetts’ 14 county governments were dissolved since the 1990s, but they are still entitled to $942 million in aid, while the six “functional” counties get another $395 million even though their budgets are quite small. Norfolk County’s entire FY 2021 revenues were $19.5 million, since most governmental functions in Massachusetts are carried out by cities and towns, but Norfolk is entitled to $137 million in Fiscal Recovery Funds under the American Rescue Plan Act—seven times its annual budget.
In Vermont, county governments do exist—barely—but have very few responsibilities and no independent revenue authority, drawing the funds to pay a few local officials—sheriffs, judges, and justices of the peace—from the state. Yet these counties, which have no functions on which this aid can be spent, receive a collective $121 million.
All told, that’s nearly $2 billion to counties without governments or independent revenue streams, not even counting the $395 million to Massachusetts’ functional counties, which have very few expenditures.
Separately, there’s the case of New York City, where city government receives $4.3 billion but the five constituent counties (coextensive with the five boroughs) receive another $1.6 billion even though most spending is consolidated at the city level.
Even in states with more traditional divisions of city and county authority, allocations cannot capture the diversity that exists across the U.S. in what is funded at the state level, at the county level, and at the city, town, borough, or township level. Across the country, there is a wide diversity in the distribution of governmental authority. Which level of government pays for schools, roads, public safety, and other major expenditures varies, but by providing formula-driven aid directly to localities, ARPA cannot reflect these important differences.
Allocations to cities, moreover, are made according to the Community Development Block Grant formula, which was designed to assess low-income housing needs in urban areas and is thus poorly suited to the task of allocating pandemic-era governmental aid. Suburban and rural areas have needs as well, and a program developed for the U.S. Department of Housing and Urban Development (HUD), which includes factors like the number of pre-1940 housing units and the number of overcrowded units, is unlikely to allocate aid according to local revenue needs.
Like states, local governments can only spend their Fiscal Recovery Funds on four categories of eligible expenditures:
- Responding to the public health emergency and its negative economic consequences (similar to the purposes authorized under the $150 billion Coronavirus Relief Fund in the CARES Act);
- Providing supplemental pay to essential workers;
- Replacing lost revenue; and
- Investing in necessary water, sewer, and broadband projects.
Collectively, local revenue was up about $29 billion (4 percent) in 2020, largely due to increased property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. collections, yet the American Rescue Plan Act provides $130.2 billion to local governments, most of which have no losses to offset. Many will struggle to find eligible ways to spend the money and will often wind up spending vast sums on relatively unimportant projects simply because they have no higher eligible use.
In a few states, moreover, the federal government has allocated money to counties with no functioning governments at all. Several may have no entity even capable of certifying for the funds, but others may be able to do so despite having no conventional functions to spend it on, or, in the case of Massachusetts’ functional counties, even though the aid vastly outstrips their budgets.
Stay informed on the tax policies impacting you.
Subscribe to get insights from our trusted experts delivered straight to your inbox.Subscribe